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OCBC Securities Reports August 2013

 
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PostPosted: Thu Aug 01, 2013 9:21 am    Post subject: OCBC Securities Reports August 2013 Reply with quote

Fortune REIT: MOU for Kingswood Ginza property

Summary:
FRT has entered into a non-binding MOU in connection with the acquisition of 100% of the issued share capital of a target company by FRT and assignment of the shareholder loans to FRT. The target company owns Kingswood Ginza Property, which comprises the entire Kingswood Ginza Mall as well as other retail, kindergarten, parking lots and ancillary spaces. The indicative purchase consideration is HK$5,849m. 142,962,000 new units, representing an increase of 8.4% of the total number of units currently in issue (excluding the new units), have been placed out at HK$6.82 each. The net proceeds of ~HK$947m will be used to partially fund the proposed acquisition. The remainder will be funded through new facilities. In our model, we assume that the acquisition will be completed by mid-September. While the acquisition is likely to be accretive, we note the continued increase in bond rates since late June, and hence lift our risk-free rate to 2.3% from 2.0%. Incorporating a higher expected market return of 13.5% as well (13.0% previously), we lower our FV to HK$6.95 from HK$7.51. On valuation grounds, we downgrade FRT to a HOLD. (Sarah Ong)

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DBS Group: 2Q in line; ended Danamon bid

Summary: DBS Group Holdings posted 2Q net earnings of S$887m this morning, up 10% YoY and -7% QoQ. This is in line with consensus estimate of S$883m. Net Interest Margin (NIM) eased off from 1.72% in 2Q12 and 1.64% in 1Q13 to 1.62% in 2Q13. Loans grew a decent 5% from last quarter to S$234.8b by Jun 2013. In terms of fee income, the top performers were Investment Banking, up 82% in 1H to S$111m, followed by Wealth Management (+44% to S$214m) and Stockbroking (+29% to S$119m). An unchanged interim dividend of 28 cents has been declared. Stock will trade ex-dividend on 15 Aug and dividend will be paid on or about 7 Oct 2013. Meanwhile, DBS has also announced last evening that the long delayed acquisition of PT Bank Danamon Indonesia has lapsed. However, while this is a slight disappointment for its Indonesian strategy, it is not totally unexpected as this proposed acquisition has been long delayed with no clear outcome. We do not expect the market to have included any possible contribution from this proposed deal and as such do not expect this to impact earnings forecasts for the next two years. Meantime, do note that our pre-results rating was a BUY with fair value estimate of S$18.28. We will provide more details after the media and analysts’ briefings later in the day. (Carmen Lee)

Yoma Strategic Holdings: Key catalyst ahead - the Landmark Project

Summary: Yoma reported 1QFY14 PATMI of S$0.4m, which decreased 80.6% YoY mostly due to higher staff costs as the group continues to build up a strong management team in anticipation of future activity. We judge 1QFY14 PATMI to be below view – forming only 3.7% of our full year forecast – due to a slower than anticipated pace of recognition at Star City and higher staff costs. The group announced that it has entered into an agreement with a third party investor for the sale of LDRs for five buildings (1043 units) in Zone B of Star City and would receive incentive fees if certain sales targets to end buyers are met. We continue to await the completion of the Landmark Project acquisition, which would likely be a key catalyst for the share price ahead. Maintain HOLD with an unchanged fair value estimate of S$0.87 (20% premium to RNAV). (Eli Lee)

Singapore Post: Expecting another steady quarter

Summary: Singapore Post (SingPost) will be announcing its 1QFY14 results after market close on 2 Aug 2013. We expect net profit to be around S$35m, which would represent about 24% of our full year estimate. Expenses are likely to remain elevated due to inflationary cost increases, growth in volume-related expenses and other administrative costs and continued investments. Looking ahead, we expect the group to continue to grow inorganically as it will be the fastest way to diversify from the mail business. As the group increases its exposure to faster-growing businesses such as the logistics and e-commerce segments, we increase our terminal growth assumption from 1.5% to 2.0%, thus bumping up our fair value estimate from S$1.23 to S$1.32. Maintain HOLD. (Low Pei Han)

Far East Hospitality Trust: Rendezvous acquisition – Issue price for new stapled securities


Summary: Far East Hospitality Trust (FEHT) has announced the issue price of new FEHT stapled securities to be issued to the The Straits Trading Company (as partial consideration for the proposed acquisition of Rendezvous Grand Hotel and Rendezvous Gallery), the Far East Organization (FEO) group of companies (pursuant to the equity placement to the FEO group), and the REIT manager (as payment for 80.0% of acquisition fee payable in relation to the acquisition). The issue price is at S$0.9302 per stapled security, based on the volume weighted price for FEHT trades done on the SGX for the period of 10 business days commencing from the day on which the existing stapled securities trade ex-distribution i.e. the period from 18 July 2013 to 31 July 2013. The trading of the 148,304,059 in aggregate of new stapled securities is expected to commence today, 1 Aug, at 2pm. Pending the 2Q13 results which will be released next week, we maintain our FV of S$1.01 and HOLD rating on FEHT. (Sarah Ong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES


- US stocks on Wed ended little changed after the Fed offered few clues on potential changes to its monetary policy.

- SGX-listed companies will have to hold their general meetings in Singapore beginning 1 Jan 2014 and conduct poll voting in two years' time.

- SGX has launched long dated order types for securities, allowing investors to retain buy or sell orders for a maximum of 30 days.

- StarHub has launched a high-speed Ethernet network for financial traders which it says is four times faster than the existing one.
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PostPosted: Fri Aug 02, 2013 8:58 am    Post subject: Reply with quote

Sembcorp Marine: New yard opens at a time of record order book

Summary: Sembcorp Marine (SMM) reported a 7.6% YoY fall in revenue to S$1.12b and a 12.5% decrease in net profit to S$124.9m in 2Q13, such that 1H13 figures accounted for about 43% of our full year estimates, which we judge to be largely within our expectations. The last quarter saw fewer projects achieving initial recognition; more are expected in 3Q13. The new Tuas yard should also see revenue contribution in 2H13. Operating margin in 2Q13 was 13.0% vs 13.1% in 2Q12. After securing new orders worth about S$3.5b YTD, the group’s net order book stands at S$14.4b, a record high in SMM’s history. Meanwhile the stock price has appreciated by about 7.3% since our last report on 6 May 2013, and has outperformed the STI by about 11.1% over the same period. Maintain BUYwith S$5.64 fair value estimate. (Low Pei Han)

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UOB: Stronger 2Q and modest rise in NIM

Summary: UOB posted 2Q13 net earnings of S$783m, better than consensus estimate of S$699.9m. Net Interest Margin improved modestly from 1.70% in 1Q13 to 1.71% in 2Q13. For the Fee and Commission income, the key outperformers were its Investment-related and credit card operations which showed both YoY and QoQ improvements. Management has declared an unchanged 1H dividend of 20 cents. The group is continuing with its strategy of growing its regional franchise. For its Wealth Management business, AUM has grown from S$48b in 2010 to S$71b as of Jun 2013. We have adjusted our FY13 estimates, lowering impairment charges and increasing operating expenses. We are maintaining our HOLD rating and our fair value estimates of S$22.97, but will turn buyer at S$21.40 or lower. (Carmen Lee)


Roxy-Pacific Holdings: $1.1b of revenues to drive earnings growth

Summary: 2Q13 PATMI is S$19.5m (EPS: 2.05 S- cents) which increased 10% YoY due to higher property development profits. 1H13 PATMI now cumulates to S$31.2m, forming 40% of our full year forecast. We judge this to be within expectations; earnings are likely to be backloaded in FY13, particularly with an anticipated one-time boost from Wis@Changi upon its TOP in 2H13. The group now sits on S$1.1b of yet unrecognized revenues from sold units – this is equivalent to 8 times FY12 property revenues and would underpin a rigorous earnings growth profile ahead in our view. Maintain BUY with an higher fair value estimate of S$0.81 (25% discount to RNAV) versus S$0.76 previously as we update for latest sales datapoints and a reduced RNAV discount. Key catalysts in 2H13 ahead include the launch of LIV on Wilkie and an earnings boost from Wis@Changi’s TOP. We also see a bonus share issue as a possibility in 2H13, which could help the counter’s uneven trading liquidity. (Eli Lee)

COSCO Corp (Singapore): Another weak quarter

Summary: COSCO Corp (Singapore)’s revenue for 2Q13 declined by 9% YoY to S$890m, while net profit fell by 56% to S$12.0m. For 1H13, the group’s net profit fell by 61% to S$21.8m, forming 45% and 29% of ours and the street’s FY13 estimates respectively. As its operating weakness is more severe than what the street had expected, we think that the street would likely lower its FY13F forecasts. The group’s balance sheet is debt-laden with net debt-to-equity ratio at 1.4x and S$1.3b of loans due within 12 months. Should the credit situation in China deteriorates further, the group may become vulnerable. Maintain SELL with unchanged FV of S$0.60. (Chia Jiunyang)

Lippo Malls Indonesia Retail Trust: 2Q13 results as expected

Summary: LMIRT posted 2Q13 gross rental income of S$40.1m, up 30.2% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions of 15.5% for the existing malls. Distributable income increased by 19.5% YoY to S$20.5m and DPU climbed 17.7% YoY to 0.93 S cents. Results for the quarter were in line with our and consensus expectations. 1H13 DPU of 1.82 S cent forms 50.6% of our FY13 estimate. We maintain our HOLD rating on LMIRT but place our fair value of S$0.52 under review. (Sarah Ong)

Sembcorp Industries: Investing in its second energy-from-waste plant in Singapore

Summary: Sembcorp Industries (SCI) announced that it will invest over S$250m to build, own and operate a facility capable of producing 140 tonnes/h of steam using industrial and commercial waste collected by its solid waste management operations. This will be SCI’s largest energy-from-waste plant in Singapore to date (also its second one here), and will be located on Jurong Island. The project will be funded by bank borrowings and internal resources, and will be completed in early 2016. SCI has a track record of managing such facilities, and its portfolio includes energy-from-waste, biomass and wind power facilities in the UK and China. Maintain BUY with S$6.48 fair value estimate on the stock. (Low Pei Han)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- S&P 500 surpassed 1,700 for the first time, after the Fed announced continued stimulus, jobless claims fell to a five-year low and manufacturing index rose to a two-year high.

- Crude palm oil prices in 2Q13 stayed flat QoQ, averaging just above RM2,300 (S$903) per tonne, a steep 30% drop from year-ago levels.

- Singapore's manufacturing sector continued to outperform its regional counterparts in Jul, expanding for the fifth consecutive month despite weaker showings across the rest of Asia.

- Keppel Offshore & Marine Ltd has secured a contract to build a jack-up rig for US$206m from Parden Holding, a company based in Uruguay.

- Parkway Life REIT reported a distribution per unit of 2.63 S-cents for the 2Q13, up 6.1% YoY, as distributable income rose to S$15.9m.
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PostPosted: Mon Aug 05, 2013 9:36 am    Post subject: Reply with quote

Golden Agri-Resources: Downgrade to SELL; poor 2Q13 showing

Summary: Golden Agri-Resources (GAR) saw 2Q13 revenue jumped 25.4% YoY and 17.6% QoQ to US$1682.3m, but weaker margins on the back of softer CPO prices led to core earnings tumbling 52.3% YoY and 50.0% QoQ to an estimated US$55.1m. 1H13 revenue grew 8.8% to US$3112.4m, meeting 49.7% of our FY13 forecast, while net profit tumbled 41.5% to US$158.1m; core earnings slipped 40.9% to US$165.2m, or just 33.7% of our full-year forecast. In view of the worse-than-expected showing and likely more margin compression ahead, we opt to slash our FY13 core earnings forecast by 19%; this in turn drops our fair value from S$0.57 to S$0.465, now based on 11x blended FY13/FY14F EPS. We also downgrade our call from Hold to SELL. (Carey Wong)

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Global Premium Hotels: 2Q13 in line

Summary: The 2Q13 results for Global Premium Hotels (GPH) were generally in line with our expectations. Revenue climbed 1.0% YoY to S$15.m and gross profit rose 1.1% to S$13.m. Administrative expense fell 19.4% to S$5.5m mainly due to one-off recognition of IPO expenses of S$1.4m in 2Q12. Interest expense was 9.8% higher at S$1.9m due to the restructuring exercise undertaken by GPH pursuant to the IPO in 2Q12. 2Q13 net profit climbed 36.2% to S$4.9m. 2Q13 hotel room revenue increased 1.3% YoY to S$15.1m. RevPAR was 2% higher at S$95.7, chiefly due to higher average occupancy rate of 93.1%, up 3.4 ppt. We expect 2H13 to be slightly better than 1H13 because we understand from industry sources that the sector as a whole has seen some stabilisation in Jul and Aug. Using a 10% discount to RNAV, we maintain our fair value of S$0.33 and BUY rating on GPH. (Sarah Ong)

Singapore Post: In Post we still trust

Summary: Singapore Post (SingPost) reported a 32.8% YoY rise in revenue to S$201.3m but saw a 2.0% decrease in net profit to S$37.3m in 1QFY14, such that the latter accounted for 25.3% of our full year estimates. Underlying net profit fell slightly by 0.9% to S$36.2m in the quarter, in line with our expectations. Margins continued to normalise as expected, while the group’s cashflow generation remained strong. In line with its usual practice, SingPost has proposed an interim quarterly dividend of 1.25 S cents/share. We look forward to the group’s transformation as it seeks more growth opportunities, but till then, we see limited upside potential unless earnings growth from its acquisitions proves better than expected. Still, we expect the share price to be supported by investors seeking yield (~4.8% FY14F). Maintain HOLD with S$1.32 fair value estimate. (Low Pei Han)

StarHub – Offers S$300 rebate for new BPL customers

Summary: StarHub Ltd has announced its “Surf & Watch” bundles specifically aimed at welcoming BPL fans home. Priced from S$47.37/month with a 24-month contract, subscribers (new and those without a contract) will get 25Mbps cable home broadband, its Deluxe HD Pack (82 channels) and a S$300 rebate; note that subscribers will have to pay SingTel S$59.90/month directly for the BPL content. According to StarHub, the rebate will be part of its Marketing & Promotions expense, and will not affect the Pay TV cost. However, as the bundle involves its older cable broadband, there could be limited appeal versus the newer NBN fibre network. We also see limited traction for existing SingTel subscribers who can continue to pay S$34.90/month for BPL. For now, we maintain SELL on StarHub with an unchanged S$3.82 fair value. (Carey Wong)

United Envirotech: Decent 1QFY14 start

Summary: United Envirotech Ltd (UEL) this morning reported 1QFY14 revenue of S$44.1m, +37.5% YoY (but -5.9% QoQ), meeting 14.2% of our FY14 forecast, while net profit climbed 3.5% YoY (down 13.8% QoQ) to S$6.1m, or 12.5% of our full-year forecast. According to management, the higher revenue came from a 23.3% YoY jump in Engineering revenue to S$31.2m, while recurring Water Treatment revenue surged 89.7% to S$12.9m. Note that its fiscal first quarter tends to be seasonally softer. Going forward, management intends to grow its recurring treatment income further and focus on securing more industrial wastewater treatment projects in China. We will speak more with management for further updates. For now, we place our Buy rating and S$1.03 fair value under review. (Carey Wong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- Oil and base metal prices gained last week as positive US and Chinese economic data fuelled higher demand expectations, according to analysts.

- The US dollar rallied last week as a weaker-than-forecast unemployment report and the Fed's pledge to keep buying bonds fails to erase speculation that the programme will be wound down this year.

- Directors’ buying was low for the second straight week while the selling was low for the ninth straight week. A total of eight companies recorded 14 purchases worth S$1.36m versus two firms with two disposals worth S$1.59m.

- Pacific Healthcare Holdings Ltd has obtained approval in-principle for proposed renounceable non-underwritten rights issue of 114,748,586 new ordinary shares at an issue price of S$0.048 for each rights share, on 1-for-4 basis.
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PostPosted: Tue Aug 06, 2013 9:09 am    Post subject: Reply with quote

United Envirotech: Decent 1QFY14 start

Summary: United Envirotech Ltd (UEL) reported 1QFY14 revenue of S$44.1m, +37.5% YoY (but -5.9% QoQ), meeting 14.2% of our FY14 forecast, while net profit slipped 2.6% YoY and 18.9% QoQ to S$5.7m, or about 12.5% of our full-year forecast. We deemed it to be a decent start as its fiscal first quarter tends to be seasonally softer. Going forward, management remains upbeat about its prospects in China, where the Chinese government has a planned investment on CNY4t in water resources by 2020; it adds that China is consistently tightening the effluent discharge standards. But we are tweaking our FY14 estimates slightly lower (revenue by 7.4%, earnings by 5.1%) to account for a likely smaller EPC pipeline. Our fair value also eases slightly from S$1.03 to S$0.975, still based on 13x FY14F EPS. Given the limited upside after the recent outperformance, we downgrade it to HOLD. (Carey Wong)

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Valuetronics Holdings: Discontinuing coverage

Summary: Valuetronics Holdings Limited (VHL) will begin FY14 on a fresh page, as it will no longer incur losses on its Licensing business following its decision to terminate operations in 2QFY13. Any recovery in VHL’s earnings will likely translate into higher dividends for its shareholders, in our view, as VHL had a relatively stable dividend payout ratio of 37-42% from FY10-13. This is also supported by VHL’s strong net cash position. Looking ahead, we believe that VHL will focus its attention largely on its LED lighting OEM business, given the robust industry growth prospects and its largest customer’s market leadership position in this field. However, given the continued lack of trading liquidity in VHL’s stock and a reallocation of resources, we are CEASING COVERAGE on the stock. Our last rating was a ‘Hold’ with a fair value estimate of S$0.195. (Wong Teck Ching Andy)

City Developments Limited: 2Q13 PATMI up 48% YoY

Summary: CDL’s 2Q13 PATMI increased 48% YoY to S$203.8m, mostly due to disposal gains from several industrial property assets. 1H13 PATMI now cumulates to S$341.5m which makes up 49% of our full year forecast. We judge this to be mostly in line with our expectations. Residential sales performances remain firm, with 2013 launches D’Nest, Bartley Ridge and Jewel@Buangkok showing healthy sell-through rates to date. In 2H13, the group expects to launch a mixed use JV project at the junction of Upper Serangoon Rd and MacPherson Rd near Potong Pasir MRT. Hotel subsidiary Millennium and Copthorne Hotels’ (M&C) 2Q13 PATMI decreased 17.7% YoY as 181k net rooms were taken out of the supply due to enhancement works. 1H13 global REVPAR, however, was up 4.1% to GBP71.27; AOR and ARR increased by 0.7 ppt and 3.1%, respectively. The group also announced a special interim dividend of 8 S-cents per share. Maintain HOLD on CDL with our fair value estimate of S$12.04 (15% RNAV disc.) under review. (Eli Lee)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES
- US stocks mostly fell on Mon because of a report indicating above-expectations growth in the service sector and a Fed official’s remarks that the Fed is closer to curbing its asset purchases.

- Singapore Exchange Ltd is relying on derivatives for growth amid a dearth of merger and acquisition candidates in Asia.

- The Singapore Mercantile Exchange (SMX) has come out to say that it is not impacted by the troubles of its sibling, the National Spot Exchange Ltd.

- A disposal gain of S$18m from the sale of Central Plaza in May 2013 gave Forterra Trust a liquidity boost and helped lift its 2Q13 net profit to a 41.7% YoY rise to S$24.2m.

- Hiap Hoe has recommended a record high interim dividend of 1.2 S-cents per share, after seeing its 2Q13 earnings surge 75.9% YoY.
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PostPosted: Wed Aug 07, 2013 9:08 am    Post subject: Reply with quote

Sembcorp Industries: Steady performance in utilities
Sembcorp Industries (SCI) reported a 6.3% YoY fall in revenue to S$2.5b and a 13.3% decrease in net profit to S$165.4m in 2Q13, such that 1H13 figures accounted for about 45% of our full year estimates. There was slower order book drawdown in the marine division in the quarter as fewer projects achieved the initial recognition milestone, while 1H13 revenue from the utilities division accounted for about 47% of our full year estimate. As expected, Singapore power spreads were weaker in 1H13 compared to 1H12, but overseas utilities helped to bump up net profit in the quarter. Going forward, management expects the utilities business to deliver a “steady performance” in 2013 despite intensified competition in the Singapore market. Maintain BUY with S$6.48 fair value estimate. (Low Pei Han)

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City Developments Limited: A dimmer residential sales outlook
CDL’s 2Q13 PATMI increased 48% YoY to S$203.8m, mostly due to disposal gains from an industrial site at 100G Pasir Panjang. 1H13 PATMI now cumulates to S$341.5m which makes up 49% of our full year forecast. We judge this to be mostly in line with our expectations. In 2H13, CDL is expected to launch the 380-unit Lush Acres EC project and a mixed development at MacPherson/Upper Serangoon Rd (266 residential and 28 retail units). Due to recent property curbs, the group expects stronger headwinds and moderating transaction volumes and prices in 2H13. In addition, management indicates that a situation of residential oversupply could ensue in 2014. While navigating a more onerous risk-reward landscape ahead, we believe that CDL could take a more measured approach to land-banking over FY13-14. Maintain HOLD with a lower fair value estimate of S$11.38 (20% RNAV disc.), versus S$12.04 previously, mainly due to a higher discount to RNAV reflecting a dimmer residential sales outlook. (Eli Lee)

Genting Singapore: Decent 2Q13 showing; but upside limited

Genting Singapore (GS) reported a better-than-expected set of 2Q13 results, with adjusted EBITDA margin recovering back to 44% from 37.3% in 1Q13. 1H13 revenue met around 50% of our full-year forecast, while net profit was nearly 64% of our FY13 figure. Going forward, management still remains slightly cautious about the slower growth outlook for China; but notes that it has yet to see much impact on its Chinese customers. Given the slightly better-than-expected showing, we opt to raise our net profit forecasts for FY13 and FY14 by around 3.5% each; but this has little impact on our DCF-based fair value, which remains at S$1.41. Given the limited upside from here, we maintain HOLD. Longer-term catalyst could come from a potential IR license overseas in markets like Japan, which is still a 2015 or 2016 story. (Carey Wong)

Hyflux: 1H13 tracking below forecast
Hyflux Ltd reported that its 2Q13 revenue fell 24.6% YoY (but rebounded 11.1% QoQ) to S$138.4m, while net profit came in around S$17.7m, +3.0% YoY and 119.9% QoQ. 1H13 revenue of S$262.9m fell 17.6% and met about 36.0% of our full-year forecast. While net profit climbed 2.1% to S$25.2m, it only met 32.8% of FY13 estimate, and we were expecting it to cover about 40%. Hyflux declared an interim dividend of S$0.007/share, same as 1H12. While the company continues to show a relatively healthy order book of S$2731m, we believe that the outlook may still be muted, given the credit crunch situation in China. As such, we are lowering our FY13 estimates for revenue by 9.6% (FY14 by 11.1%) and earnings by 12.8% and 14.0% respectively. Our fair value correspondingly falls to S$1.215 (based on 20x blended FY13/FY14F EPS). We maintain our HOLD rating; but we do not rule out any near-term knee-jerk reaction. (Carey Wong)

StarHub Ltd: Decent 2Q13 showing; but risks remain
StarHub Ltd reported a decent set of 2Q13 results, with revenue down 0.7% YoY (+1.2% QoQ); net profit improved 15.9% YoY and 10.3% to S$100.6m. StarHub declared a quarterly S$0.05/share dividend as guided. For 1H13, revenue slipped 1.2% to S$1166.9m, or about 46.4% of our full-year forecast, while net profit climbed 9.5% to S$191.8m, meeting 53.2% of FY13 estimate. For 2013, StarHub has kept its previous guidance; it also does not expect the BPL cross-carriage to have a material financial impact. Despite the decent 2Q13 showing, we opt to keep our FY13 estimates, as potential margin pressures are likely to emerge in 2H. Maintain SELLon the stock with an unchanged DCF-based fair value of S$3.82. (Carey Wong)

Wilmar: 1H13 results slightly below expectations
Wilmar International Limited (WIL) posted its 2Q13 results last evening, with revenue easing 5.4% YoY (+2.2% QoQ) to US$10426.3m, on lower CPO prices (but was alleviated by volume growth in other segments). While net profit jumped 86.5% YoY to US$218.5m (mainly due to the loss in its Oilseeds & Grains segment in 2Q12), it was still down 30.7% QoQ, likely hit by lower crushing margins in the quarter. For 1H13, revenue slipped 4.0% to US$20626.8m, meeting 41.5% of our full-year forecast, while net profit climbed 43.1% to US$533.9m, or about 40.1% of our FY13 forecast. WIL declared an interim dividend of S$0.025/share, versus S$0.02 in 1H12. We will have more after the analyst briefing at noon. We maintain HOLD on the stock but place our S$3.25 fair value (based on 12.5x FY13F EPS) under review. (Carey Wong)

Ezion Holdings: Operations remain strong
Ezion Holdings (Ezion) reported a 80.9% YoY rise in revenue to S$67.2m and a 28.8% increase in net profit to S$36.2m in 2Q13, such that 1H13 net profit accounted for 55% of our full year estimates. Excluding a one-off disposal gain in 1Q13, core 1H13 net profit represented 49% of our full year estimates, in line with expectations. Gross profit margin remained strong at 46.3% in 2Q13 vs 45.9% in 2Q12 and 44.9% in 1Q13. Looking ahead, more assets are expected to be deployed, and there should be more contributions from the commencement of the APLNG and GLNG projects this year. Meanwhile, Ezion is proposing a bonus share issue of one bonus share for every five existing ordinary shares. Pending an analysts’ briefing later in the morning, we maintain our BUY rating but put our fair value estimate of S$2.62 under review. (Low Pei Han)

Yangzijiang Shipbuilding: Still a steady ship
Yangzijiang Shipbuilding (YZJ) reported a 12% YoY rise in revenue to RMB4.4b and a 8% decrease in net profit to RMB811.7m in 2Q13, such that 1H13 net profit accounted for 54% of our full year estimates, within expectations. Gross margin in the shipbuilding related segment dropped from 24.2% in 2Q12 and 25.9% in 1Q13 to 20.6% in 2Q13, while gross margin in the group’s investment division remained high. YZJ has secured 27 effective shipbuilding contracts worth US$1.01b in 1H13 with four other options converted into effective orders in Jul 2013. As growth in the shipbuilding industry remains slow, management is looking at its investments business to weather through challenging times. Pending an analysts’ briefing later, we maintain our HOLD rating but put our fair value estimate of S$0.95 under review. (Low Pei Han)

Far East Hospitality Trust: 2Q13 below expectations
Far East Hospitality Trust (FEHT) has announced 2Q13 results which we judge to be below our expectations and the street’s. Gross revenue for was S$29.3m or 7.9% lower than the IPO prospectus forecast. In addition, RevPAR for the hotels was S$168, 11% lower than the forecast of S$189. The serviced residences, however, generally performed in line with expectations, with RevPAU of S$230, versus S$228 in the forecast.As a result, we see net property income and income available for distribution coming at S$26.9m and S$23.2m, which are 6.8% and 4.1% below the IPO forecasts, respectively. 2Q13 distribution per stapled security was 1.43 S cents which we view to be below expectations. We place our FV of S$1.01 and Hold rating on FEHT UNDER REVIEW. We will be speaking with management later today. (Sarah Ong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks extended losses into a second day Tue as Fed official Charles Evans said the economy should be able to shoulder reduced Fed asset purchases later this year.

- Rotary Engineering posted a net profit increase to S$5.1m in 2Q13 from S$1.03m in 2Q12, with a 13% YoY increase in revenue to S$126.2 million.
- The Hour Glass Ltd posted a net profit attributable to shareholders of S$8.8m for 1QFY13, down 6% YoY, on the back of higher operating expenses amid a more competitive marketplace.

- Vallianz Holdings reported a 29% fall to US$1.89m in 2Q13 net profit attributable to shareholders.
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PostPosted: Mon Aug 12, 2013 9:05 am    Post subject: Reply with quote

Biosensors International Group: A quarter to forget

Summary: Biosensors International Group (BIG) reported 1QFY14 earnings which were significantly below ours and the street’s expectations. Core PATMI plunged 57.3% YoY to US$12.1m on the back of a 11.2% decline in revenue to US$76.7m, forming 10.1% and 20.0% of our original FY14 forecasts, respectively. This was due to another lacklustre quarter of contribution from licensing and royalties revenue and an inventory drawdown in its distributor sales channels in China in anticipation of new stent tenders. Our revised FY14 revenue forecast implies a 10.4% growth and comes in below management’s ~15% growth guidance. We also see mounting cost pressures for BIG and slash our FY14 and FY15 core PATMI projections by 34.4% and 29.9%, respectively. Our FCFE-derived fair value estimate falls from S$1.60 to S$0.96. We expect some near-term selling pressure on the stock and downgrade BIG from Buy to HOLD. (Wong Teck Ching Andy)

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Neptune Orient Lines – Lacklustre 2H ahead

Summary: With a disappointing set of 2Q13 results, we downgrade Neptune Orient Lines’s (NOL) to SELL. Despite the onset of the 3Q13 peak season, freight rates according to the Shanghai Containerised Freight Index remain weak across the board and traditional rate hikes have yet to make up ground lost in 2Q13. In addition, volume demand should remain weak given the tepid market conditions, and supply overhang continues to render industry action moot. With this downward outlook likely to extend into the medium term, we lower our FY13/14 forecasts accordingly and reduce our P/B peg to 0.9x from 1.1x previously. As a result, our fair value estimate falls to S$0.95 (S$1.38 previously). (Lim Siyi)

Noble Group Ltd: Downgrade to SELL with S$0.76 FV

Summary: Noble Group (Noble) reported a poor set of 1H13 results last Wed, marred by losses in its Agricultural segment in 2Q13, such that reported earnings only met 20% of our full-year forecast. No doubt the second half tends to be seasonally stronger; but we suspect that its Agriculture segment could continue to be a drag on its overall profitability. As such, we see the need to sharply reduce our FY13 earnings forecast by as much as 43% (FY14 by 18%); the group’s targeted cost savings will probably have a more meaningful impact in FY14. Even as we roll forward our 10x valuation to blended FY13/FY14F EPS, our fair value will drop sharply from S$1.09 to S$0.76. Downgrade our call from Hold to SELL. (Carey Wong)

UOL Group: Boost from fair value gains

Summary: UOL reported 2Q13 PATMI of S$431.4m which increased 151% YoY mostly due to fair value gains at Novena Square, United Square and Odeon Towers where valuation cap rates have compressed some 25 to 50 bps. Excluding fair value and other one-time gains, 1H13 attributable profit is an estimated S$164.4m which is broadly in line with our expectations – constituting 45% of OIR’s FY13 forecast of S$368.3m – but somewhat below the street’s view (41% of FY13 consensus of S$391.8m). For UOL’s residential strategy ahead, we see management remaining cautious and more likely to replenish land at the rate of sales or below, and capital deployment is likely to be focused on growing recurring income in investment and hospitality assets. To recap, UOL had made a cash offer of S$2.55 per share to delist PPHG and we understand that the exit offer is now unconditional with a closing date of 13 Aug 2013. Maintain HOLD with an unchanged fair value estimate of S$7.16 (20% RNAV disc.). (Eli Lee)

Wilmar: 2H13 outlook still challenging

Summary: Wilmar International Limited (WIL) reported 1H13 revenue slipping 4.0% to US$20626.8m, meeting 41.5% of our full-year forecast; net profit climbed 43.1% to US$533.9m, or about 40.1% of our FY13 forecast. WIL declared an interim dividend of S$0.025/share, versus S$0.02 in 1H12. Going forward, WIL notes that the overall environment remains “challenging”, but it remains cautiously upbeat that it can continue to see a seasonally stronger second half performance. As 1H13 results were slightly below forecast, we pare our FY13F earnings by 6.7% (FY14F by 3.6%). But as we roll forward our unchanged 12.5x peg to blended FY13/FY14F EPS, our fair value inches up slightly from S$3.25 to S$3.33. In view of the still difficult operating environment and the credit crunch in China, we maintain HOLD and would be buyers at S$3.10 or better. (Carey Wong)


Yangzijiang Shipbuilding: Still a steady ship

Summary: Yangzijiang Shipbuilding (YZJ) reported a 12% YoY rise in revenue to RMB4.4b and a 8% decrease in net profit to RMB811.7m in 2Q13, such that 1H13 net profit accounted for about half of our full year estimates, within expectations. Gross margin in the shipbuilding related segment dropped from 24.2% in 2Q12 and 25.9% in 1Q13 to 20.6% in 2Q13, while gross margin in the group’s investment division remained high. Despite stiff competition in the shipbuilding industry, YZJ secured 27 effective shipbuilding contracts worth about S$1.01b in 1H13, but likely at single digit gross margins. Meanwhile, the group continues to grow its financing business, which we now forecast greater revenue contributions. We increase our FY13/14F earnings by 3-4%, and with the more favorable RMB/SGD exchange rate, our fair value estimate increases from S$0.95 to S$0.99 (based on 8x FY13/14F core earnings). Maintain HOLD. (Low Pei Han)

Far East Hospitality Trust: 2Q13 below expectations


Summary: 2Q13 results for Far East Hospitality Trust (FEHT) were below our expectations and the street’s. Gross revenue was S$29.3m or 7.9% lower than the IPO prospectus forecast, affected by the hotels' performance. Net property income and income available for distribution came in at S$26.9m and S$23.2m, which were 6.8% and 4.1% below the IPO forecasts, respectively. 2Q13 DPS was 1.43 S cents; 1H13 DPS of 2.81 S cents tracked below our expectations, corresponding to 47% of our prior FY13 estimate of 6.0 S cents, which we now lower to 5.7 S cents. We have transitioned to a DDM-based model, from a RNAV model previously. Adjusting our FY13F revenue assumptions downwards, our FV falls to S$0.92 from S$1.01. We maintain a HOLD rating on FEHT and estimate a FY13 yield of 6.2%. (Sarah Ong)

CWT Ltd: 2Q13 within expectations

Summary: CWT reported a decent set of 2Q13 results that were roughly in-line with our expectations. Revenue jumped 66% YoY to S$1.7b, driven by higher contribution from its newly established Commodity SCM business. However, the group incurred (i) higher administrative expenses (S$43.7m, +17% YoY) from management and restructuring costs, and (ii) higher financing costs (S$8.5m, +8% YoY) due to higher borrowing and trade volume. The declines were partially offset by improved contribution from its joint-ventures and tax saving, resulting in net profit easing 6% YoY to S$18.1m for 2Q13. For 1H13, revenue and net profit formed 50% and 46% of our FY13F estimates respectively. We will speak to management to obtain more colour. In the meantime, we keep our BUY rating and S$2.08 fair value estimate unchanged. (Chia Jiunyang)

VARD Holdings: Secures USD1.1b contract

Summary: Vard Holdings Limited has secured contracts for the design and construction of four Pipe Lay Support Vessels (PLSVs), worth about USD1.1b (NOK 6.5b). The contracts were from joint ventures of DOF Subsea and Technip. Two of the PLSVs will be built in Romania in 2Q-3Q16, while the remaining two will be delivered from Brazil in 4Q16-2Q17. We are in the process of adjusting our models. In the meanwhile, we put our Sell rating and S$0.80 fair value UNDER REVIEW. (Chia Jiunyang)
Yoma Strategic Holdings: JV successful in Mandalay airport tender

Summary: Yoma reported that it has a 5% stake in a consortium, with Mitsubishi Corp. and JALUX Inc., that has successfully tendered for the upgrade and operation of the Mandalay International Airport. The consortium is expected to be awarded the tender upon negotiation, finalization and agreement of the final contract with relevant authorities. While this is a positive development, we see the financial impact on Yoma to be likely capped given that it has only a 5% stake and that the initial equity contribution by all the parties are estimated at around US$3.38m. Yoma also noted that the investment is not expected to have any material financial impact on the consolidated net tangible assets and earnings per share for the current year ending Mar 2014. Maintain HOLD with an unchanged fair value estimate of S$0.87. (Eli Lee)

Singapore Economy: 2013 GDP growth forecast upgraded to 2.5-3.5%

Summary: According to the MTI, the Singapore economy grew by 3.8% YoY in 2Q13, better than the street’s expectations of 3.5% growth, and also better than the 0.2% growth seen in 1Q13. On a seasonally adjusted, annualised basis, the economy expanded by 15.5% QoQ, and was significantly higher than the 1.7% expansion in 1Q13. This was mainly driven by manufacturing, which grew by 32.1% QoQ, reversing the 12.1% contraction in 1Q13, largely due to higher output in the biomedical manufacturing and electronics clusters. Construction grew by 11.2%, compared to 1Q13’s 10.3% growth. Finally, services expanded by 11.5% after 1Q13’s 7.8% rise, driven mainly by the wholesale & retail trade and the transportation & storage sectors. As global macroeconomic conditions are expected to pick up in 2H13, the MTI has upgraded Singapore’s 2013 GDP growth forecast from 1.0-3.0% to 2.5-3.5%. (Low Pei Han)



For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stock indexes declined on Fri, with the Dow Jones Industrial Average halting its longest weekly winning streak since Aug of last year.

- Singapore-Listed companies have posted a lower aggregate 2Q13 net profit of S$7.04b, down by 2.8% YoY.

- Raw material prices won support last week from upbeat Chinese economic data, while cocoa futures hit 11-month high points on tight supply fears, analysts said.
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PostPosted: Mon Aug 19, 2013 8:57 am    Post subject: Reply with quote

Fw: SIN: MARKET PULSE: Cache, Hospitality Sector, Rowsley (19 Aug 2013) : OIR

joel.tan
to:

19/08/2013 08:46
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PostPosted: Tue Aug 20, 2013 9:07 am    Post subject: Reply with quote

Ezion Holdings: Raising funds for the right reasons
Further to an earlier announcement that a subsidiary of Ezion had entered into a letter agreement for a proposed issue of redeemable exchangeable preference shares, the subsidiary has now entered into a subscription agreement for the issue, raising net proceeds of about S$29.5m. Any dilutive impact will only be from Jul/Aug 2014 onwards, and is also small at 1.43% of the existing share capital. YTD, the group has raised close to S$290m of funds and most of the proceeds are for the acquisition of assets, due to the promising pipeline of opportunities that the group sees ahead. Maintain BUY with S$2.90 fair value estimate, which would drop to S$2.42 after adjusting for a proposed bonus share issue (details in 7 Aug 2013 report). (Low Pei Han)

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Healthcare REITs: Expecting growth in 2H13
Within the healthcare REITs space, both First REIT (FREIT) and Parkway Life REIT (PLREIT) recently reported 2Q13 results which were in-line with market expectations. Looking ahead, we expect their 2H13 DPU to be boosted by new properties acquired over the past 1-3 months. Despite the volatility in the IDR and JPY vis-ŕ-vis the SGD, there has been minimal impact on FREIT and PLREIT due to a favourable lease structure and hedging strategies adopted, respectively. Both healthcare REITs are also seeking to mitigate their interest rate risks. But we maintain NEUTRAL on the healthcare REITs sub-sector given its pricey valuations and negative sentiment surrounding interest rate sensitive instruments. (Wong Teck Ching Andy)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks dropped on Mon after a choppy trading session, with the energy and financial sectors leading the S&P 500 lower, as Treasury yields hit fresh two-year highs.

- Proposed reduction of standard share size traded on SGX from 1k to 0.1k would benefit retail investors as they have another avenue to buy blue chip stocks at lower entry prices.

- The business community welcomed plans to offer more support to cope with economic restructuring, though their concerns about tightening of foreign labour and rising costs remain.

- China Mining International's mandate to pursue metal mining businesses in China is given a new lease of life with a reverse takeover deal set to transform the property development firm into a pure mining company.

- Cedar Strategic Holdings says that it is now looking to raise up to S$14.7m in a rights issue. It has also signed up a unit of an internationally renowned construction player to further its plans to become a regional real-estate player.
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PostPosted: Thu Aug 22, 2013 9:19 am    Post subject: Reply with quote

ECS Holdings: Beneficiary of product refresh cycle
We met up with the management of ECS Holdings following
its recent 2Q13 results. Revenue and PATMI rose 23.5%
and 11.0% YoY to S$1,017.5m and S$9.0m, respectively.
However, after adjusting for forex and other exceptional
items, we estimate that core earnings declined 7.3% YoY
from S$7.4m to S$6.9m, which was below our
expectations. On a positive note, ECS managed to lower its
net gearing ratio from 59.4% (as at end 2Q12) to 38.5%
(as at end 2Q13) due to good working capital management.
Looking ahead, we expect ECS to be a beneficiary of new
product launches by major IT vendors such as Apple. We
trim our FY13 and FY14 core PATMI forecasts by 6.2% and
3.9%, respectively. But as we also roll forward our
valuations to 6x blended FY13/14F core EPS, our fair value
estimate only declines marginally from S$0.57 to S$0.56.
Maintain BUY.
More reports:
- Lippo Malls Indonesia Retail Trust: Weakening IDR likely
to affect NAV
- Vard Holdings: Secures NOK800m contract
News Headlines
• US stocks ended sharply lower as investors weighed the
Feds signalling that it remained on course to curb its
monthly bond purchases by the end of the year.
• Parkson Retail Asia's net profit for 4QFY13 fell 62.1% YoY
to S$3.4m, even as its revenue inched up 0.6% YoY to
S$102.9m.
• PEC Ltd posted an 11% YoY increase in net profit
attributable to equity-holders to S$5.06m for 4QFY13
(versus S$4.55m in 4QFY12).
• Neo Group Ltd has made its maiden overseas expansion,
inking a five-year licence agreement with PT Umi Sushi
Indonesia to launch three sushi retail outlets in Jakarta.
• TSH Australia Holdings, a wholly owned subsidiary of
Tuan Sing Holdings, has received a writ of summons by
Kara Investments, a unit of Morgan Stanley, and GSS III
Rutgers BV.
• Airlines, aviation-related operators and construction
firms, and REITs with assets in Paya Lebar, stand to
benefit the most from plans to expand and upgrade
Changi Airport, according to brokerage houses.
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PostPosted: Fri Aug 23, 2013 9:19 am    Post subject: Reply with quote

United Envirotech: Secures RMB100m BOT project
United Envirotech Ltd (UEL) has just secured a RMB100m BOT (Build, Operate, Transfer) contract in Shandong Province, China; the 30k m3/day underground waste-water treatment plant is a follow-up to its earlier 100k m3/day drinking water project secured in Yantai last year. Despite the latest contract win, we note that it will only meet around 20% of our new contract wins expected this year; hence, we opt to leave our forecasts unchanged for now. Instead, we could see a large dilution from the move to issue shares to buy over the membrane operations of Memstar Technology Ltd. As such, we are also more inclined to maintain our HOLDrating, although the current upside to our unchanged S$0.975 fair value (13x FY14F) is around 8%. (Carey Wong)

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Yangzijiang Shipbuilding: VLGC orders for Chinese yards?

According to Platts, a number of Chinese firms are seeking older VLGCs, as the country seeks to build its own VLGC fleet. There is talk that China Oriental Energy may look to order more VLGCs, with YZJ as a potential beneficiary, but we note that while the latter’s Xinfu yard has plans to build large vessels and has an annual production capacity of up to 10 VLCCs, YZJ’s capabilities remain primarily in containerships and bulk carriers. As China seeks to reduce its shipbuilding capacity, what is imperative for YZJ is to continue its smooth execution, secure orders (albeit at almost breakeven levels), scale up the value chain by building green vessels and developing its offshore capabilities, while waiting for the industry consolidation to run its course. Should it be one of the few large yards left standing when the dust has settled, YZJ would then find itself in a stronger position than before. Maintain HOLDwith S$0.99 fair value estimate. (Low Pei Han)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks closed higher, getting a slight boost after Nasdaq-listed stocks resumed trading from a more than three-hour halt due to technical trouble.

- Fed’s 30-31 Jul meeting minutes offered little hint on when the US central bank might reduce its support for the US economy.

- Hafary Holdings posted a full-year net profit attributable to equity-holders of S$25.4m, 5.6 times the last financial year's S$4.5m.

- China Environment is looking to raise about S$15.9m in net proceeds through the issue of up to 65 million placement shares at S$0.2513 each.

- Global Logistic Properties pre-leased 24k square metres (258.3k square feet) to a global consumer goods company at GLP Park Jiangning in Nanjing, eastern China.

- Centurion Corporation Limited announced that its subsidiary Westlite Dormitory (V One) Pte Ltd submitted a tender for a land at Woodlands Avenue 10 which closed on 16 Aug 2013.
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PostPosted: Mon Aug 26, 2013 8:58 am    Post subject: Reply with quote

CPO Stocks: Outlook still fairly muted
Most CPO (crude palm oil) companies reported fairly
disappointing 1H13 results recently, no doubt hurt by
weaker CPO prices in 2Q13 (CPO prices fell 25% YoY and
another 5% QoQ). But going forward, the outlook for CPO
prices remains largely muted, given the sluggish economy,
as well as the expected rise in production of vegetable oils.
While most of the plantation stocks have corrected quite a
bit of late, making valuations less demanding, we note that
there could still be earnings disappointments for upstream
players should CPO prices fall further. We have a SELL on
GAR and are reviewing our Hold rating on GPR. While we
have a HOLD on WIL, its downstream business may be
vulnerable to further economic contraction in China.
News Headlines
• Bulls have turned tail and are on the run, according to
investment-sentiment surveys, leaving traders to gauge
if this means stocks could test all-time highs set earlier
this month.
• Director activity rose for the second straight week with
77 transactions worth S$54.5m, up sharply from the
previous week's 35 trades worth S$18.7m.
• Development charges are generally expected to go up
from 1 Sep on the back of higher land prices over the
past six months. However, the pace of hikes may be
conservative to promote a stable property market, said
some property consultants polled by BT.
• Small and medium enterprises of Singapore looking to
move into Iskandar Malaysia may have to wait up to
three years before they can access a steady pipeline of
manpower.
• India's rupee led currency declines among the biggest
emerging-market economies last week as Fed signalled a
reduction in stimulus is still on track, spurring cash to
flow back into larger nations.
• Plunging emerging market currencies on the prospect of
Fed tapering have stirred memories of 1997 Asian
financial crisis, but analysts doubt a similar catastrophe
is in the making.
• Thailand's economy should see YoY growth in 3Q13 while
weakness in the baht is not a concern and will be good
for exports, Finance Minister Kittirat Na Ranong said.
Key Singapore Indices
Close Chg % Chg
STI 3088.9 -0.6 0.0
Catalist 182.6 -0.5 -0.3
Finance 795.6 1.6 0.2
Property 712.0 -0.6 -0.1
Electronics 683.9 57.2 9.1
Vol(m) 3273.0 -1373 -29.5
Val(S$m) 1606.6 -81.6 -4.8
World Indices
Close Chg % Chg
Dow Jones 15010.5 46.8 0.3
Nasdaq 3657.8 19.1 0.5
S&P500 1663.5 6.5 0.4
FTSE 6492.1 45.2 0.7
KLCI 1721.1 0.7 0.0
Hang Seng 21863.5 -31.9 -0.1
Nikkei 13660.6 295.4 2.2
SET 1338.1 -13.7 -1.0
KOSPI 1870.2 21.0 1.1
TWSE 7873.3 58.9 0.8
Market Statistics (SG)
STI 52-week range 2,932 3,465
No. of gainers 261
No. of losers 263
No. of unchanged 189
Economic Statistics
S$/US$ 1.3 0.0
Yen/US$ 98.8 0.0
3-mth S$ SIBOR 0.4 0.0
3-mth US$ SIBOR 0.3 0.0
Crude futures (US$) 107.0 -0.5
Research Team
(65) 6531 9800
e-mail: info@ocbc-research.com
OCBC Investment Research
Market Pulse
26 Aug 2013
2
CPO Stocks: Outlook still fairly muted
● Disappointing 1H13 showing
● CPO outlook still muted
● Risk of earnings disappointment in
2H
1H13 results largely disappointing
Most CPO (crude palm oil) companies
reported fairly disappointing 1H13 results
recently, no doubt hurt by weaker CPO prices
in 2Q13 (CPO prices fell 25% YoY and
another 5% QoQ). Under our coverage,
Golden Agri’s (GAR) 1H13 earnings only met
about 34% of our full-year forecast. Global
Palm Resources (GPR) was even harder hit,
as its 1H net profit met just 27% of our fullyear
forecast. Wilmar International Limited
(WIL) fared slightly better, with 1H13 core
earnings meeting 40% of our FY13 forecast,
as its substantial downstream business
helped to mitigate the poorer upstream
showing.
Outlook for CPO prices still quite muted
But going forward, the outlook for CPO prices
remains largely muted, given the sluggish
economy in China (one of the biggest buyers
of CPO and other vegetable oils), while even
Indonesia’s economy1 could be facing
increased headwinds due to reduced
spending power on the back of a higherthan-
expected spike in inflation and a sharp
weakening in the IDR1. On the supply side,
things are not looking too good either – CPO
production as well as the other vegetable oil
substitutes are expected to increase in 2H13.
Based on current estimates, market watchers
like Oil World1 believe that “world production
is likely to exceed demand”. The Hamburgbased
industry researcher adds that there is
little scope for more growth in demand for
vegetable oils to make biodiesel, citing
unchanged biodiesel mandates in the EU and
“hesitatingly” implemented increases in Brazil
and Argentina1.
Avoid upstream players for now
Most of the plantation stocks have corrected
quite a bit of late – on average, we estimate
that these stocks are down about 17% YTD,
versus the STI’s 3% slide, making valuations
less demanding. But we note that there could
still be earnings disappointments for
upstream players should CPO prices fall
further. We have a SELL on GGR and are
reviewing our Hold rating on GPR. While we
have a HOLD on WIL, its downstream
business may be vulnerable to further
economic contraction in China. (Carey
Wong)
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PostPosted: Tue Aug 27, 2013 9:17 am    Post subject: Reply with quote

Technology Sector: Slightly improved sentiment
Under our tech sector coverage, Venture Corp (VMS)
reported earnings which were in-line with our expectations
for the recently concluded 2QCY13 results season.
However, core PATMI for ECS Holdings missed due to
weaker-than-estimated gross margin. Encouragingly, a
number of companies which we spoke to highlighted an
improvement in sentiment amongst their key customers,
which is in-line with the expected uptick in the global
economy. However, we maintain NEUTRAL on the tech
sector, as we believe that the economic recovery remains
fragile. ECS [BUY; FV: S$0.56] is still our preferred pick
within the sector given its cheap valuations (FY14F PER of
5.0x and P/NTA of 0.5x).
More reports:
- Suntec REIT: New city taking shape
News Headlines
• US stocks closed lower in light volume after Secretary of
State John Kerry called Syria’s actions ‘inexcusable’ and
a report said the US would hit its debt limit in Oct.
• Fraser and Neave will gain an effective way to monetise
its assets by creating a hospitality real estate investment
trust, analysts say.
• Silverlake Axis posted a 21% YoY increase in PATMI to
RM196m for FY13 as a shift to higher-margin products
helped to overcome flat revenue growth.
• Cordlife Group saw its FY13 net profit rise nearly 95%
YoY to S$13.5m due to healthy revenue growth, strong
margins and a S$2.7m one-time gain from disposal of a
stake in associate China Stem Cells (South) Co.
• FJ Benjamin Holdings reported a 68% YoY drop in PATMI
to S$4.45m for FY13 as sales in its North Asian timepiece
business declined on slower economic growth in China
and reduced tourist spending in Hong Kong.
• 4QFY13 earnings rose 10% YoY to S$9.2m at Civmec,
helped by a R&D tax incentive.
• Tiong Woon Corporation Holding reported a net profit of
S$17.6m for FY13, reversing a net loss of S$4.85m in
FY12.
Key Singapore Indices
Close Chg % Chg
STI 3084.4 -4.4 -0.1
Catalist 182.1 -0.6 -0.3
Finance 792.5 -3.1 -0.4
Property 708.3 -3.7 -0.5
Electronics 696.6 12.6 1.8
Vol(m) 4371.6 1098.6 33.6
Val(S$m) 1502.3 -104.4 -6.5
World Indices
Close Chg % Chg
Dow Jones 14946.5 -64.1 -0.4
Nasdaq 3657.6 -0.2 0.0
S&P500 1656.8 -6.7 -0.4
FTSE 6492.1 45.2 0.7
KLCI 1722.5 1.4 0.1
Hang Seng 22005.3 141.8 0.6
Nikkei 13636.3 -24.3 -0.2
SET 1329.2 -9.0 -0.7
KOSPI 1887.9 17.7 0.9
TWSE 7895.0 21.7 0.3
Market Statistics (SG)
STI 52-week range 2,932 3,465
No. of gainers 239
No. of losers 291
No. of unchanged 168
Economic Statistics
S$/US$ 1.3 0.0
Yen/US$ 98.4 -0.1
3-mth S$ SIBOR 0.4 0.0
3-mth US$ SIBOR 0.3 0.0
Crude futures (US$) 106.2 0.3
Research Team
(65) 6531 9800
e-mail: info@ocbc-research.com
OCBC Investment Research
Market Pulse
27 Aug 2013
2
Technology Sector: Slightly improved
sentiment
● Expect a brighter 2H13
● But downside risks remain
● ECS Holdings remains our
preferred pick
2QCY13 results roundup
Under our tech sector coverage, Venture
Corp (VMS) reported earnings which were inline
with our expectations for the recently
concluded 2QCY13 results season. However,
core PATMI for ECS Holdings missed due to
weaker-than-estimated gross margin. Within
the sector, other notable results came from
Hi-P International, which recorded a PATMI of
S$10.9m (partly boosted by S$3.8m of fair
value and forex gains), as compared to a net
loss of S$2.1m in 2Q12. In contrast, Elec &
Eltek suffered a 64.1% YoY decline in its
2Q13 PATMI to US$4.2m due to rising
minimum wages in China and teething
production problems at its new Yangzhou
plant.
Still a backend loaded year
Encouragingly, a number of companies which
we spoke to highlighted an improvement in
sentiment amongst their key customers,
which is in-line with the expected uptick in
the global economy. Companies such as VMS
and Hi-P have new programmes which are
scheduled to undergo mass production in
2H13, and this should aid their 2H13
operational performance. Despite this
positive development, we note that actual
sales and subsequent orders will still have to
depend on the actual end-user demand,
which remains volatile, especially for
consumer electronics products.
PC sales outlook still weak as mobile
devices dominate
Due to the continued cannibalisation of PCs
by mobile devices such as tablets and
smartphones, industry watcher IDC now
expects 2H13 worldwide PC shipments to
decline by 7.0% YoY (previously forecasted a
3.2% dip). On the other hand, sales of
tablets and smartphones are estimated to
grow at 34.7% and 21.4% in 2013,
respectively. This growth is expected to
moderate to 18.6% for tablets and 12.6% for
smartphones in 2014, which we believe is
partly attributed to increasing saturation,
especially within the high-end smartphones
space.
Maintain NEUTRAL
Despite expectations for a firmer
macroeconomic recovery in the second half
of the year and 2014, we believe that the
global economy remains fragile. Hence we
maintain NEUTRAL on the tech sector. ECS
[BUY; FV: S$0.56] is still our preferred pick
within the sector given its cheap valuations
(FY14F PER of 5.0x and P/NTA of 0.5x).
(Wong Teck Ching Andy)
. . . . .
Suntec REIT: New city taking shape
● Further progress on refinancing
● Performance likely to improve
● Valuations remain compelling
Establishment of Euro MTN programme
Suntec REIT announced on 15 Aug that it has
established a US$1.5b Euro Medium Term
Note programme, with ANZ Bank, Citigroup
Global Markets, DBS Bank and Standard
Chartered Bank as arrangers and dealers for
the exercise. This comes promptly after
Suntec REIT has secured a S$500m five-year
unsecured loan facility in Jul to refinance all
its borrowings maturing in Oct 2013. We
believe that Suntec REIT may possibly make
use of the programme to issue longer-term
unsecured notes to address (part of) its
refinancing needs (S$773.5m club loan) due
in 2014. This will be a positive development
in our view, as Suntec REIT will not only be
able to lock in part of its debts into fixed
rates, enhance its debt maturity profile but
also improve its unencumbered asset ratio.
The programme has been assigned a “Baa2”
rating by Moody’s Investors Service.
Worst may be over
Looking ahead, we remain positive on Suntec
REIT’s performance. While its 2Q13 NPI and
distributable income were down 38.5% and
18.7% YoY respectively due to the
concurrent execution of Phases 1 and 2 of
the remaking of Suntec City, we believe that
the worst is likely over given that Phase 1
enhancement works were completed in Jun
and the retail space there has since become
operational. Committed occupancy for Phase
1 has improved to 99.6% from the precommitment
of 96.7% achieved in 1Q,
whereas passing rent of S$13.99 psf pm was
OCBC Investment Research
Market Pulse
27 Aug 2013
3
also significantly higher than the rate of
S$11.31 for the rest of Suntec City Mall and
S$12.59 projected for the whole project.
Together with the continued strength and
active lease management at its office
segment, we are hopeful that any volatility in
Suntec REIT’s financial performance is likely
to be cushioned as it commences its Phase 3
(last phase) next year.
Maintain BUY
At current price, Suntec REIT trades at one of
the lowest P/B in the S-REITs sector at
0.73x, while offering a compelling FY14F
yield of 6.9%. We are revising our fair value
from S$1.85 to S$1.80 due to higher riskfree
rate. However, as valuations remain
attractive and outlook is positive, we
maintain BUY on Suntec REIT. (Kevin Tan)
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PostPosted: Wed Aug 28, 2013 9:05 am    Post subject: Reply with quote

Goodpack Limited: Decent FY13 results
Goodpack’s FY13 results were in-line with expectations.
Revenue grew by a smaller 7.7% YoY to US$190.9m while
PATMI improved 13.4% YoY to US$51.3m as its cost saving
initiatives helped to offset higher depreciation and financing
costs from a larger fleet and increased borrowings
respectively. Similar to last year (FY12), management
declared a final dividend of 2 S cents and a special dividend
of 3 S cents. Although we lower our revenue forecasts for
FY14, we still expect growth improvement following the
commencement of key clients’ synthetic rubber (SR)
operations in Singapore and a new SR contract in Russia. In
terms of margins, we only expect a small drop-off as
continued cost saving initiatives should keep a lid on logistic
and handling expenses. In light of its unchanged
fundamentals and recent share price correction, we
maintain BUY on Goodpack with a slightly lower fair value
of S$1.69 (S$1.80 previously).
News Headlines
• US stocks fell hard, with the Dow ending at a two-month
low, as unease over possible US action against Syria
shook global markets.
• Monday's short-selling attack on China Minzhong Food
(CMF) by Glaucus Research prompted some local broking
houses to either cease coverage of CMF or even the
entire S-chip sector.
• Eu Yan Sang International registered a 49% YoY fall in
net profit to S$4.7m for 4QFY13 despite an 11% YoY rise
in revenue to S$77.3m.
• Wing Tai's 4QFY13 earnings rise 72% YoY to S$275.8m
and is proposing to reward shareholders with 12 S-cents
in total dividends for FY13 (versus 7 S-cents in FY12).
• IHH Healthcare Bhd registered an improved operational
performance in 2Q13, boosted by the ramp-up of new
hospitals, as well as a large one-off tax credit write-back.
• Sim Lian Group's net profit for FY13 fell 27% YoY to
S$166.9m on the back of higher contract costs and a fall
in revenue.
• Ausgroup yesterday reported a 93.6% YoY plunge in net
profit to A$525k in 4QFY13 (versus A$8.25m in 4QFY13).
Key Singapore Indices
Close Chg % Chg
STI 3036.2 -48.2 -1.6
Catalist 180.7 -1.4 -0.8
Finance 781.7 -10.8 -1.4
Property 700.2 -8.1 -1.1
Electronics 698.4 1.9 0.3
Vol(m) 3635.1 -736.5 -16.8
Val(S$m) 1420.5 -81.8 -5.4
World Indices
Close Chg % Chg
Dow Jones 14776.1 -170.3 -1.1
Nasdaq 3578.5 -79.0 -2.2
S&P500 1630.5 -26.3 -1.6
FTSE 6445.3 -46.8 -0.7
KLCI 1701.2 -21.3 -1.2
Hang Seng 21874.8 -130.6 -0.6
Nikkei 13542.4 -93.9 -0.7
SET 1294.0 -35.2 -2.6
KOSPI 1885.8 -2.0 -0.1
TWSE 7820.8 -74.1 -0.9
Market Statistics (SG)
STI 52-week range 2,932 3,465
No. of gainers 112
No. of losers 468
No. of unchanged 140
Economic Statistics
S$/US$ 1.3 0.0
Yen/US$ 97.1 0.1
3-mth S$ SIBOR 0.4 0.0
3-mth US$ SIBOR 0.3 0.0
Crude futures (US$) 109.7 0.7
Research Team
(65) 6531 9800
e-mail: info@ocbc-research.com
OCBC Investment Research
Market Pulse
28 Aug 2013
2
Goodpack Limited: Decent FY13 results
● Cost saving initiatives pay off
● FY14 to see improvements
● Recent weakness calls for
accumulation
FY13 within expectations
Goodpack’s FY13 results came in within
expectations. Although revenue grew by a
smaller 7.7% YoY to US$190.9m (versus
11.7% YoY in FY12) following a slowdown in
the rubber demand, PATMI improved 13.4%
YoY to US$51.3m (net margins +0.6ppt to
27.3%) as its cost saving initiatives helped to
keep logistic and handling costs in check and
offset higher depreciation and financing costs
from a larger fleet and increased borrowings
respectively. Similar to last year (FY12),
management declared a final dividend of 2 S
cents and a special dividend of 3 S cents.
Top-line growth to improve in FY14
Entering FY14, we expect top-line growth to
pickup following the commencement of key
clients’ synthetic rubber (SR) operations in
Singapore and a new SR contract in Russia.
In addition, the potential of a boost from the
automotive segment remains.
A lid on opex & financing costs
Despite having a larger IBC fleet, we only
expect margins to come off slightly. The
group has demonstrated its ability to keep a
lid on the main opex component of logistics
and handling costs and FY14 should not be
an exception. Coupled with the shift towards
purchasing a larger proportion of new IBC
requirements as well as some existing leases,
leasing costs should also taper off gradually.
As for financing costs, the bulk of its debts
have fixed rates so we are unconcerned over
a potential hike in rates.
Maintain BUY
We lower our FY14F revenue growth forecast
to 9% (15% previously) as we temper the
pace of new IBC demands. This causes our
DCF-derived fair value to lower to S$1.69
(S$1.80 previously). Nonetheless,
Goodpack’s fundamentals remain unchanged
and its recent share price correction opens
up a buying opportunity for long-term
investors. Maintain BUY. (Lim Siyi)
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PostPosted: Thu Aug 29, 2013 9:12 am    Post subject: Reply with quote

Oil and Gas: Looking beyond the volatility
YTD, the FTSE Oil and Gas index has generally tracked the broader market, though there have been instances of a divergence in performance. Besides the exploration and production segment garnering more investor interest, we are increasingly positive on the OSV segment, while prospects of the rig market remain bright, underpinned by the sustained high oil price environment. Still, the relatively high-beta O&G sector is very much sensitive to macroeconomic events. The possibility of increasing capital flows from Asia to the US remains, and investors may want to look beyond the short term volatility and focus on the positive longer-term growth prospects of the sector. Maintain Overweight with a one-year horizon, with Ezion Holdings [BUY, FV: S$2.90], Keppel Corp [BUY,FV: S$12.53] and Sembcorp Marine [BUY, FV: S$5.64] as our preferred picks. For investors seeking less volatility in terms of earnings but with O&G exposure, Sembcorp Industries [BUY, FV: S$6.48] is a worthy candidate. (Low Pei Han)

MORE REPORTS

Local Retail REITs: Outlook remains sanguine
Local retail landlords ended 2Q13 on a positive note, with results mostly in line with our expectations. Aggregate leverage for the quarter has also improved sequentially across the board. Notably, a significant portion of the REITs’ existing borrowings are either based on fixed rates or hedged. This will likely limit the impact of rising interest rates on the REITs’ DPUs and yields. Looking ahead, we are maintaining our positive view on the local retail REITs due to AEI activities and better rental rates for the leases due for renewal. In addition, the local retail landscape has remained largely stable. According to Jones Lang LaSalle (JLL) 2Q13 Singapore property market review report, the growth in rents island-wide is likely to range between 0% and 0.2%, while capital values grow by 2.7%-3.8% in 2013. We are keeping our OVERWEIGHT rating on the local retail REIT subsector. Starhill Global REIT remains as our preferred pick, due to its apparent growth drivers, higher-than-average yield of 6.8% and compelling valuation (0.88x P/B). (Kevin Tan)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.


NEWS HEADLINES

- US stocks advanced for the first session this week, with oil producers leading the gains as the price of crude settled at a more-than-two-year high above US$110 a barrel.

- Sembcorp Industries announced the extension of its wastewater treatment business in China's Liaoning province to two new sites.

- ASL Marine Holdings reported an 83.3% YoY jump in net profit to S$15.2m for 4QFY13 (versus S$8.3m in 4QFY12), on the back of a 27.8% YoY rise in revenue to S$149.5m.

- Intraco has joined forces with Tat Hong Holdings and a Myanmar businessman to set up a JV company to enter the crane rental and excavator distribution business in Myanmar.

- Metech International, a company that deals with electronic waste recycling, has reported a net profit of S$844k for 4QFY13 against a net loss of S$14.7m in 4QFY12.

- Sin Heng Heavy Machinery's FY 2013 net profit rose 47.4% YoY to S$13.76m on the back of a "broad-based improvement across geographical markets and business segments".
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PostPosted: Fri Aug 30, 2013 9:22 am    Post subject: Reply with quote

ComfortDelGro: Recent weakness creates buy-in
opportunity
ComfortDelgro (CDG) was re-awarded the region 4 contract
by the New South Wales transport ministry on Thursday,
and this should remove any negative overhang for the
group’s future in one of its key markets of Australia.
However, its share price has failed to react to the news and
remains weak, which is unwarranted in our view. Although
investors may have concerns over rising fuel prices and the
potential for rate hikes, CDG is unaffected given its
substantial hedge (80%) on fuel requirements for the rest
of the year and low gearing position. Therefore, we feel that
this recent share weakness creates an attractive
opportunity for investors to allocate into this fundamentally
healthy company with earnings stability. We upgrade CDG
to BUY with an unchanged fair value estimate of S$1.95.
News Headlines
• Better-than-expected US economic data has increased
the odds that the Fed will scale back bond purchases
next month.
• Higher taxation levels and challenging market conditions
caused Olam’s 4QFY13 PATMI to plunge 48% YoY to
S$56.8m, in spite of a rise in revenue.
• Lum Chang Holdings' FY13 PATMI rose a marginal 2%
YoY to S$21.5m despite a 75% YoY increase in turnover
to S$494.6m.
• Fraser and Neave's JV partner in Myanmar Brewery Ltd is
trying to oust the conglomerate from the partners'
promising beer-making business.
• Guocoland Limited saw its net profit for FY13 tumble
49% to S$32.22m.
• Chinavision Media Group Ltd posted a 30% rise in net
profit to HK$133m (S$22m) for 1H13, (versus
HK$102.3m in 1H12).
• Oxley Holdings boosted its PATMI to S$38m for 4QFY13
(versus S$1.7m in 4QFY12) as it started to recognise
inflows from the more than two dozen projects it
launched over the past year.
• Genting Bhd reported a 12.7% YoY fall in 2Q13 net profit
to RM466.3m (versus RM534.5m in 2Q12).
Key Singapore Indices
Close Chg % Chg
STI 3038.0 33.9 1.1
Catalist 180.0 1.2 0.7
Finance 782.8 7.1 0.9
Property 699.9 7.1 1.0
Electronics 698.4 2.5 0.4
Vol(m) 4177.7 909.9 27.8
Val(S$m) 1321.7 -227.5 -14.7
World Indices
Close Chg % Chg
Dow Jones 14841.0 16.4 0.1
Nasdaq 3620.3 27.0 0.8
S&P500 1638.2 3.2 0.2
FTSE 6483.1 53.0 0.8
KLCI 1703.8 17.6 1.0
Hang Seng 21704.8 180.1 0.8
Nikkei 13459.7 121.3 0.9
SET 1292.5 16.8 1.3
KOSPI 1907.5 23.0 1.2
TWSE 7917.7 93.1 1.2
Market Statistics (SG)
STI 52-week range 2,932 3,465
No. of gainers 342
No. of losers 178
No. of unchanged 161
Economic Statistics
S$/US$ 1.3 0.0
Yen/US$ 98.3 0.1
3-mth S$ SIBOR 0.4 0.0
3-mth US$ SIBOR 0.3 0.0
Crude futures (US$) 106.6 -0.2
Research Team
(65) 6531 9800
e-mail: info@ocbc-research.com
OCBC Investment Research
Market Pulse
30 Aug 2013
2
ComfortDelGro: Recent weakness
creates buy-in opportunity
● Wins Region 4 auction
● Rising fuel cost not a concern
● Fundamentals unchanged
Major NSW region re-awarded
As expected by management, ComfortDelgro
(CDG) has been re-awarded the region 4
contract by the New South Wales transport
ministry. The contract will be for the next five
years with a three year right of renewal
subject to performance targets. As this
region accounts for more than a third of
CDG’s Australian bus contributions, this win
should remove any negative overhang for the
group’s future in one of its key markets of
Australia.
Larger losses versus broad market
unwarranted
Despite this positive development, CDG’s
share price remains weak, which is
unwarranted in our view, given the counter’s
promising earnings growth and visibility.
Since the release of its 2Q13 results only 15
days ago, the counter has fallen by 9.0%
versus a broad market decline of only 5.7%
for the FTSE Straits Times Index, and much
of the price correction has been due to recent
market volatility created by upcoming key
events in Sep as well as rising oil prices and
anticipated rate hikes. However, with 80% of
its fuel requirements hedged at favourable
prices for the rest of the year, CDG is not
vulnerable to such fuel risks. In addition,
with a net cash position, CDG is also
unaffected by the potential for rising interest
rates.
Smooth remainder of year ahead
With almost three-quarters of the year gone,
we expect CDG to continue experiencing
revenue growth for its SG operations (bus,
rail and taxi) as demand remains healthy and
ridership growth decent. Overseas, its
Australian and UK bus operations should see
slight increments from contributions of recent
acquisitions.
Upgrade to BUY
Leaving our FY13 forecasts unchanged, our
fair value estimate remains at S$1.95.
However, we upgrade CDG to BUY as the
recent near-term weakness creates an
attractive opportunity for investors to
allocate into this fundamentally healthy
company with earnings stability. (Lim Siyi)
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